ECOFIN Council ministers discussed the possible introduction of a Financial Transactions Tax (FTT) under enhanced cooperation at its meeting on Tuesday 9 October. Seven States (Germany, France, Belgium, Austria, Slovenia, Portugal and Greece) had already written to the Commission seeking enhanced cooperation on FTT by Tuesday's meeting and four other states (Italy, Spain, Estonia and Slovakia) indicated that they would also be requesting enhanced cooperation. Therefore, the quota of nine requests for enhanced cooperation appears to be in place and the ECOFIN Council will address this matter again in November this year.

The procedure to be followed for enhanced cooperation is defined in Article 20 of the Treaty on European Union and Articles 326 to 334 of the Treaty on the Functioning of the European Union. This procedure requires the participation of at least nine Member States. The design of the tax itself is to be agreed by the participating Member States unanimously. Enhanced Cooperation remains open to any other Member State at any time.

Many of the FTT proponent countries don't have any form of transaction tax at present. As it happens, both Ireland and the UK already do – Stamp Duty is charged on share transfers. It may be easier for countries wishing to introduce levies on their financial services industry for the first time to sign up to a predesigned EU model, rather than to go it alone. It is also easier for countries whose financial services industry comprises a minor part of the overall economy to experiment with new taxes than it is for countries such as Ireland and the UK where financial services are a major component of the international offering.

Concerns that the Financial Services sector does not contribute sufficient levels of taxation can and are being addressed by measures like Stamp Duty. In some countries, France being one example, what could be described as a surcharge on employers PRSI is levied on financial services companies by way of redress for the VAT exemption. Irish entities pay Corporation tax at 12.5% generally, and again redress for this tax treatment is applied by not having a ceiling on employers PRSI contributions.

We understand that some of the concerns at EU official level in relation to the FTT had to do with displacement (transactions moving out of the EU) and collection. It is unlikely that the enhanced cooperation approach will do much to resolve these concerns. Some commentators have pointed towards the negative experience of Sweden in the 1980s and early 1990s when that country introduced an FTT. Not only did the Swedish FTT drive transactions offshore, it served to dilute the capital tax base. No assets, no CGT.

For further details see the press release from Ecofin: http://www.consilium.europa.eu/homepage/highlights/financial-transaction-tax-towards-enhanced-cooperation?lang=en

and the press release from Commissioner Šemeta: http://europa.eu/rapid/press-release_MEMO-12-762_en.htm?locale=en#PR_metaPressRelease_bottom